After Leaping 27% hyungji Elite Co., Ltd. (KRX:093240) Shares Are Not Flying Under The Radar

hyungji Elite Co., Ltd. (KRX:093240) shares have had a really impressive month, gaining 27% after a shaky period beforehand. The annual gain comes to 182% following the latest surge, making investors sit up and take notice.

Since its price has surged higher, given close to half the companies in Korea have price-to-earnings ratios (or "P/E's") below 13x, you may consider hyungji Elite as a stock to avoid entirely with its 47x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

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The recent earnings growth at hyungji Elite would have to be considered satisfactory if not spectacular. It might be that many expect the reasonable earnings performance to beat most other companies over the coming period, which has increased investors’ willingness to pay up for the stock. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for hyungji Elite

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on hyungji Elite's earnings, revenue and cash flow.

Does Growth Match The High P/E?

The only time you'd be truly comfortable seeing a P/E as steep as hyungji Elite's is when the company's growth is on track to outshine the market decidedly.

Retrospectively, the last year delivered a decent 3.1% gain to the company's bottom line. Pleasingly, EPS has also lifted 1,752% in aggregate from three years ago, partly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

This is in contrast to the rest of the market, which is expected to grow by 29% over the next year, materially lower than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that hyungji Elite's P/E sits above the majority of other companies. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the bourse.

The Bottom Line On hyungji Elite's P/E

Shares in hyungji Elite have built up some good momentum lately, which has really inflated its P/E. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that hyungji Elite maintains its high P/E on the strength of its recent three-year growth being higher than the wider market forecast, as expected. Right now shareholders are comfortable with the P/E as they are quite confident earnings aren't under threat. If recent medium-term earnings trends continue, it's hard to see the share price falling strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 5 warning signs for hyungji Elite (3 shouldn't be ignored!) that you need to be mindful of.

You might be able to find a better investment than hyungji Elite. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.